The Commodities Feed: Oil Rallies As Chances Of US-Iran Deal Fade

Oil prices are seeing renewed strength amid additional signs that a US-Iran deal remains difficult to achieve

Energy - US-Iran deal obstacles

Oil prices rallied yesterday, with ICE Brent settling 3.8% higher on the day, taking it back above $82/bbl. This strength continued in early morning trading today. Developments over the last 24 hours or so demonstrate once again that negotiations between the US and Iran are unlikely to proceed smoothly.

There are suggestions that Iran wants to ban US and Israeli ships from the Strait of Hormuz, while also seeking compensation from hostile countries before they can use the strait again. In addition, Iran still wants to charge fees for ships transiting the Strait of Hormuz, in the form of service fees rather than a toll. There doesn’t seem to be much of a compromise, which ultimately makes it more difficult to reach a sustainable deal.

Despite clear signs of progress in recent days, the tenor of the rhetoric and growing distrust between the US and Iran mean things could go from bad to worse once again. For now, we hold onto our view that flows will start to normalise through the third quarter, which leaves us expecting Brent to average $80/bbl this quarter. However, there's plenty of risk and uncertainty to this view.

Saudi Arabia cut its official selling prices for almost all crude grades and to all destinations for September loadings. Arab Light into Asia was cut by S$0.50/bbl to a $2/bbl discount to the benchmark. There has been a push by Asian buyers for the Saudis to cut their official selling prices (OSPs) amid the escalation in the Red Sea. It means that some tankers are taking the longer and more expensive shipping route around Africa.

Metals - Copper nears record high

Copper traded near record highs, with LME prices trading comfortably above $14,000/t, amid tariff-related stockpiling into the US and increasingly tight physical conditions outside the country. The latest move higher was also fuelled by reports that the DRC had moved to restrict exports of copper concentrates. While the headlines initially raised supply concerns, the impact on the refined market is likely to be limited given that most of the DRC's copper is exported as cathode rather than concentrate. Even so, the news reinforced an already bullish market backdrop characterised by low inventories, tight concentrate availability and ongoing supply disruptions.

Copper fundamentals remain supportive. Tight physical markets, low inventories and constrained mine supply should continue to underpin prices. With copper trading close to record highs, any disappointment on US tariff measures could trigger a period of consolidation.

In other base metals, nickel fell towards its lowest level since mid-July after reports that Indonesia may grant additional ore production quotas to a major producer. The prospect of higher Indonesian output renewed concerns over oversupply. This reinforced expectations that the nickel market will remain comfortably supplied through the second half of the year.

We remain cautious on nickel. Continued Indonesian supply growth is likely to keep the market in surplus and limit any upside potential.

Agriculture – UNICA report lower sugarcane crush

The latest fortnightly report from the Brazilian Sugarcane and Bioenergy Industry Association (UNICA) shows that sugar cane crushing in Central-South Brazil stood at 69.8mt in June. This is down 14.5% from a year ago. Sugar production fell 26.3% year-on-year to 3.9mt, as mills diverted more cane towards ethanol production. Sugar prices spent much of the year trading below ethanol parity, pushing producers to increase their ethanol mix. Around 44.5% of cane was allocated to sugar production, lower than 52.3% in the same period last year. Cumulative sugar production so far this season stands at 10.8mt, down 12.4% YoY, while the cumulative cane crush has risen 3.8% YoY to 214.5mt.

Data from Cameroon’s National Cocoa and Coffee Board shows that cocoa output fell 20% YoY to 247.9kt in the 2025/26 season. It’s the lowest level in five years, and reverses the record harvest produced a year ago. The decline was primarily driven by adverse weather conditions, ageing plantations, and deteriorating soil fertility. Meanwhile, cocoa exports fell 34.7% YoY to 125.5kt, while domestic grindings declined 13.1% YoY to 95.9kt.